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April 6, 2018 • EPE Related News

Las Cruces Sun-News: El Paso Electric customers in New Mexico to see discounts

LAS CRUCES - El Paso Electric customers across Doña Ana County will see slight discounts in their 2018 bills, beginning in May.

That's due to corporate tax cuts OK'd by Congress and President Donald Trump, as well as action this week by the New Mexico Public Regulation Commission — the five-member state board that regulates private utility companies like El Paso Electric Co. — to pass those savings to customers.

While the tax reform benefited the company in one way, it also detrimentally affected it in another, according to company documents. And that could affect the company's future rate hike requests.

In response to federal tax reform OK'd in late 2017, the state PRC formally asked utilities how they planned to account for the corporate tax savings in customers' rates. El Paso Electric responded with proposed options for discounts.

Wednesday, the PRC in a 5-0 vote OK'd one of the options, which calls for the discounted rate to be applied to all of the New Mexico customers' bills by May 1. It will result in a 3.9 percent discount to one of the major components of a customer's electricity bill.

Electric company officials said they haven't yet calculated the average per-customer savings.

District 5 PRC Commissioner Sandy Jones, who represents Doña Ana County, said the electric company also had proposed, instead of issuing discounts immediately, waiting until its next rate hike case, at which point rebates could have been issued to customers. That could have been a year and a half from now.

Jones said he thought customers would want to see the discounts sooner, especially because summer heat — and higher electric bills caused by running air conditioners — are just around the corner.

 

"Traditionally now is the time your bills are the highest," he said. "I wanted to make sure we got that savings on to customers before we got into this high cooling costs."

Within its New Mexico operations only, the company expects to save about $4.9 million in 2018 due to the federal reduction in corporate tax from 35 percent to 21 percent, according to documents filed with the PRC.

El Paso Electric also is moving forward with discounts to its Texas customers, officials said. The company operates in both states.

Jim Schichtl, EPE vice president of regulatory affairs, said some other utilities in New Mexico were engaged in rate cases with the PRC, and so the discounts — because of the federal tax reform — were factored into those proceedings. El Paso Electric didn't have an active case related to the issue, so it went through the recent process to issue a credit or discount on customers' bills.

 

The PRC's vote calls on the electric company to consult with the New Mexico Attorney General's Office on finalizing the details and to respond to the PRC within 10 days with a finalized plan for implementing the discounts.

"They want us to implement those changes in bills by May 1," Schichtl said.

Jones said the PRC then will approve the final plan. Not all customers are issued their electricity bills on May 1, but the discounts should apply to those who do, as well as to subsequent rounds of EPE billing.

Customers' bills should reflect a new line item showing the exact amount of the discount, EPE officials said. 

Now, EPE bills in New Mexico are separated into seven line items contributing to the total. George De La Torre, manager of external and public affairs, said the 3.9 percent discount will be applied to two of them, the "customer charge" and the "energy charge."

The Sun-News applied the discount to a customer bill of $49.48 for a Las Cruces home from March 2018 and estimated the savings, if it were applied to that particular bill, would be about $1.20.

EPE officials said the discounts will apply to all customers, including residential and commercial.

El Paso Electric Co. officials noted in filings that, while the corporate tax rate decreased in 2018, another provision of federal tax reform eliminated "bonus depreciation," which allowed for tax payment deferrals.

"In the recent past, regulated utilities and customers benefited from bonus depreciation," the company stated. "Utilities were able to defer tax payments to later date and use this deferral for working capital and general corporate purposes, such as servicing debt and funding capital expenditures."

Less tax deferrals "partially offset the lower tax rate," documents state.

Also, the reduced tax deferrals are expected to hurt the company's cash flows, which can weaken its credit rating and lead to higher costs for the utility and customers, according to documents. 

The federal tax reform, known as the Tax Cuts and Jobs Act of 2017, will have "a negative effect on cash flows, so EPE will need to adjust its capital requirements in the future and adequate regulatory support will be necessary to help preserve EPE's creditworthiness," according to the company.

The company expects to file its next "base rate" case, or rate change request, no later than July 2019, according to the documents.

https://www.lcsun-news.com/story/news/local/2018/04/05/el-paso-electric-customers-new-mexico-see-discounts/491323002/

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